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Lending totalled an estimated £10.3bn in May, down 2 per cent from the £10.5bn lent in April and a 58 per cent drop from the £24.7bn lent in May last year, the CML found.

While the split between house purchases and remortgages was not yet available, the CML said remortgaging had fallen away in recent months in the face of attractive reversion rates and tighter lending criteria for the best deals.

However, approvals data from the Bank of England showed a slight uplift in purchases, it said.

Paul Samter, economist for the CML, said: "While signs from the housing market have been more encouraging, we do not anticipate a significant recovery in activity in the coming months. Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders’ limited access to funding will constrain activity for some time yet."

Mark Osland, director of London-based IFA Formula, said: "We have seen an increase in new sales, but from the low level of last year. It has been driven partly by bottled-up demand, and partly by people who feel there are bargains out there. Mortgage rates are at a very low level even if they are not as low as they should be."

However, Mr Osland said there had been some reduction in remortgaging.

"Many people have no option but to stay with their lender at the end of the special rate term because of the reduction in mortgage availability and changes in products."

He said he expected to see a small improvement in the level of mortgage lending transacted for clients in June.